TYPES OF LOANS
This used to be a question that mortgage professionals could easily answer. Now…not so much. With all the government changes we’ve experienced over the last few years, the industry has become incredibly complicated.
In Canada, a mortgage holder can now be placed into three categories and until a mortgage professional or bank representative knows which category you fit in, anyone will have a hard time quoting you a rate.
An insured mortgage is someone purchasing a property with less than 20% down. These clients tend to be first time home buyers and are putting 5%, 10% or 15% down payment. There are three insurers in Canada and any of these mortgages must be insured by CMHC, Genworth or Canada Guarantee. It is this category where people tend to get very competitive interest rates as the loans are insured and payments are guaranteed to the lender or bank (because of the insurance company)
Two types of people fit into this category:
1) Someone purchasing with 20% down payment or more and is taking a 25 year amortization or less.
2) Someone that has an existing mortgage and is transferring to a new lender keeping the mortgage amount and amortization the same.
Interest rates in this category land on a sliding scale – the more down payment or equity you have, the more competitive your interest rate will be.
This is where we tend to see the highest interest rates. A mortgage is considered uninsurable if someone is trying to do either of the below:
1) Refinance – taking additional funds out of your property for renovations or consolidating debts or any other reason.
2) Anyone wanting a 30 year amortization. Even if you have a lot of equity in your home, the moment you ask for a 30 year amortization, you go into this “uninsurable bucket”